Quinn: A song and dance for Tesla's 'gigafactory'

By Michelle Quinn mquinn@mercurynews.com

Posted:
08/13/2014 07:06:41 AM PDT

Updated:
08/13/2014 07:07:13 AM PDT

It is the summer's biggest economic development sweepstakes: Officials in five Western states, including our own, are scrambling to woo Tesla to be the home of its $5 billion "gigafactory," to build batteries for its cars and other companies.

The scramble for the high-profile plant, and the prospect of 6,500 manufacturing jobs, comes at a time when there is growing concern about how to address the nation's increasing income inequality. Tesla has even more allure; it represents a future-oriented industry.

That's enough to get officials in California, Arizona, New Mexico, Texas and Nevada to do everything short of begging. They are rushing incentive packages through state legislatures and trying to remove regulatory hurdles, anything to sweeten the deal to snag one of the two $5 billion factories. Tucson's mayor even sent Tesla CEO Elon Musk an honorary building permit.

Seriously?

"Don't be so quick to roll your eyes at the behavior of these eager states," Mark Muro, a senior fellow at the Brookings Institution, told me.

The Tesla gigafactory is a plum, he said. It's "big enough and prominent enough that its brand, workforce and supply chain can foster broader growth, potentially like the arrival of Japanese automakers in the South did in the 1980s."

Here in Silicon Valley, we aren't used to this sort of strutting and preening to attract a company.

With our nice weather and the self-propelled tech industry, we tend to accept as an article of faith that, of course, companies want to be here. With the unemployment rate hovering around 5 percent for the region, we tend to forget that these prosperous times leave out many.

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But other areas aren't so fortunate, and not too proud to showboat.

In June, Texas Gov. Rick Perry drove a Tesla Model S sedan to Sacramento and taunted California officials about what he sees as the overwhelming case to locate the gigafactory in the Lone Star State.

And last week, California Sen. Ted Gaines, R-Roseville, traveled to Tesla headquarters in Palo Alto to deliver a golden shovel as proof of the state's eagerness to work with Tesla on bringing the gigafactory to the Golden State.

"It sends a clear signal that we want to do everything we can to help this happen in California," Gaines told me.

Ground has already broken in Nevada at a potential site for a gigafactory, but there's been no firm commitment yet. The state may call a special session of the Legislature to get an incentive package passed. (Tesla has asked states to come up with about 10 percent of the $5 billion cost.)

John Boyd, principal at the Boyd Co., a corporate location firm, sees value in officials doing public stunts like Gaines and the Tucson mayor.

They "demonstrate a willingness to work with Tesla to get the job done," he said. The politicians' actions won't close the deal, but they "keep the lines of communication open and demonstrate a pro-business acumen."

But such public displays of affection "give the impression that the incentive process will drive the location decision," argued Dennis Donovan, a principal at WDG Consulting, another corporate facility site selection firm. He tells his clients "to identify locations confidentially that meet operating requirements of the business and then engage in a dialogue with the state."

The Tesla beauty pageant is reminiscent of the 1985 competition for which state would be the home of General Motors' first Saturn subsidiary. Seven governors went on the Phil Donahue show to pitch directly to GM's chairman about why their state should be the one. Cities made their case on billboards along Detroit's freeways, near GM's headquarters. Tennessee won that contest for the $3.5 billion plant, which included the promise of 6,000 jobs and tax revenue. The facility produced Saturn vehicles from 1990 until 2007.

As Tesla weighs its choices, I'm sure access to energy, the right workforce and transit lines are top priorities, but so are things states can offer like tax incentives, hiring credits and the clearing of regulatory hurdles. I expect California lawmakers are working behind the scenes to make the state's case.

And you know what, it's worth it since much of this state outside our bubble here in the valley could use the boost. Heck, if a song and dance could help, let's do it.